The Auchan group is going through tough times: the French distribution giant was forced to admit to a loss of 1.1 billion euros in early March. A major reorganisation is about to begin.
Up to 800 jobs in jeopardy
After Carrefour and Casino, Auchan is the third French distribution giant to announce a major reorganisation. The group revealed a yearly loss in excess of 1.1 billion euros in early March (on an annual turnover of about 40 billion euros) and immediately started a profitability exercise for its 637 stores and commercial sites in France. The initial result of that is a list of 21 loss-making sites, including 13 supermarkets, 4 Chronodrive pickup points, 2 shopping centres and 1 hypermarket. The sites employ about some 800 people.
Retail specialists claim the French distributors have been focusing on the growth of physical sales locations for too long. Such an approach works while the revenue is growing, but now that people are spending less in French supermarkets and hypermarkets, that model has met its limitations. "Auchan is one of the parties that remained stuck in the denial phase the longest, but now the company has not got a choice anymore," retail specialist Olivier Dauvers says in La Croix.
Need for more neighbourhood stores and franchisees
Auchan's lack of timely initiatives becomes apparent from the group's domestic store portfolio (still representing 35 % of the turnover): 80 % of the turnover still comes from the hypermarkets. Auchan is barely able to compete with the prices of rival Leclerc and the rise of online giants such as Amazon. The actions of the yellow vests, who regularly block access to major shopping centres, have only made matters more difficult. In November and December alone, Auchan lost 140 million euros in turnover.
"Auchan's store portfolio is no longer in keeping with the times," Dauvers confirms. Auchan only has 350 smaller proximity stores, a segment that is growing and which generates bigger profit margins. By comparison, Intermarché now has 1600 of such stores. Auchan also focuses on integrated stores, just like Carrefour. Meanwhile, groups such as Intermarché, Leclerc and Système U use independent franchisees more often, who are quicker to respond to changing market circumstances.
CEO Edgar Bonte, who has been running the chain since October, still claims to believe in the hypermarket formula, provided it reinvents itself: more focus on experience (with catering and food corners) and more shop-in-shops in collaboration with other store chains from parent group Mulliez Holding, including Decathlon, Leroy Merlin or Kiabi.